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tv   Squawk Box  CNBC  December 14, 2009 6:00am-9:00am EST

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i don't know. >> we know the i from incomplete. we remember that. >> it's very pc. we wouldn't want anyone to think they're not doing well in school and they need to work harder. let's not do that. >> talk about great inflation. >> you bring up harvard. >> with president speaking to bankers, citi is near a deal to pay back bailout money. the proposed amendment would let the bank raise more than $10 billion in new capital by issuing common stock and pay back the t.a.r.p. funds. citi borrowed $45 billion under the program. bank executives hope the treasury will announce it will sell 34% of the stake in citi hold by the government. we know talks went well into the night last night. we're on the lookout for anything official today. >> one of the big stories of the day is abu dhabi bailing out neighboring dubai today offering $10 billion in surprise aid.
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we thought they would do it and said they wouldn't and now they will. dubai world had $10 billion coming due today. dubai warns creditors still needed to approve a standstill on outstanding debt. equities on the region rising on the news. the stock market soared 10%. it's giving a boost so some up more than a percentage point earlier today. world leaders continuing to old international talks in copenhagen today to try to tackle global warming. what's been happening? it's great to see you. >> reporter: hi, becky. it might be a bit of a sad day for children by saying that. we saw father christmas in a headlock. there are a couple other father christmases right behind me here. this is another protest taking place. relatively peaceful protest but police take no changes so a couple characters did have to get picked up. it's a bit of a peaceful
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gathering behind me. it's been active over the past week and will continue to be a busy week. i caught up with tony blair yesterday and spoke to him about what he hopes to get out of the climate conference this year and also asked him about whether or not he thought that the idea about taking the special drawing rights and money set aside via imf to help the developing countries in alleviating some of the climate strain and whether that was an idea. he tended to agree with that. he said it's not a bad idea to look at alternative routes of getting funding. also i was north of here. it's a place you go as a child with grandparents and see the castle. this time it was immersed in business leaders again there to talk about the climate change development and what should be done from the angle of business. so i spoke to the ceo and chairman of coca-cola company about what he hopes to get out of copenhagen.
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>> we look upon sustainability and we have selected three clear platforms. one is water. one is carbon footprint and one is packaging. the three platforms. they are part of our business. we don't see us as spending money. we see that as those elements related to refrigeration and packaging and related to water as part of our daily business planning both in the long as well as in the short-term. >> reporter: it does seem if you look at it simply if you make consumers pay for dirty products so to speak that would be one way of alleviating the strain that has to come from the consumer, the drive, the push toward a greener climate. the other thing is that a lot of these business liede eleaders oe
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alongside with a bunch of other business leaders, they seem to support the cap and trade system but the question is whether or not we'll get the clarity that we need out of copenhagen in order to help these business leaders take a step forward in the direction that they should be going whether cap and trade or taxation or a national agreement or more of an international agreement and again whether we get an ambitious or not so ambitious plan this time around. back to you guys from super cold copenhagen. >> a busy week in copenhagen. more from them during the course of the week. we got futures up overnight. asia had a decent session. we'll get to overseas market. chloe cho is in singapore but let's get the latest out of europe from carolyn. good morning. >> good morning to you. the $10 billion aid for dubai also driving the european markets higher this morning. all higher by almost 1%. it's no surprise the banking stocks are the biggest gainers
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on this. let's look at the u.k. bank specifically in connection with dubai here. hsbc and barclay's up between 2% and 4%. now staying with banks in the u.k., lloyds banking group said the takeout for recent rights issue was over 95%. very successful given this was the world's biggest rights issue ever at $22 billion. before i send it to chloe in singapore, cadbury apart from rebuffing kraft's bid over and over again, raising long-term sales and margin targets for the next four years and says it sees a double digit growth in dividends starting 2010 and now let's go to asia and singapore to get an update on trading session there with chloe. >> thank you so much. it was really all about the debt developments. abu dhabi coming to the rescue of dubai here in asia. take a look at the final scores
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for the asian session. we had really strong gains coming out of the china region because markets had more time to react to developments coming out of dubai. north asia on the other hand, those markets, japan, south korea and australia didn't have that much time because trading sessions were about to come to a close. the big story out of asia today, japan's important survey and it was mixed because sentiment positive but it fell to record low levels but the developments coming out of dubai paired back losses for the nikkei ending flat. strong gains coming out from contractors and trading houses in japan and south korea and that's why you saw nikkei trading fat. kospi closing up with half a percent gain. look at what happened in china. the hang seng managing to reverse earlier losses. we saw that for standard charter enjoying a gain of 5% as we heard this news about dubai.
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on the other hand, look at the shanghai composite finishing up 1.7% at that one point during early morning session this index had fallen as much as 2%. it's not that shanghai or the china market has a lot of exposure to dubai. it's about risk coming back on and for now it looks like it has so on that note i'll send it back to you. >> thank you for that. as we mentioned at the top of the show, the president meeting with heads of the nation's biggest banks today. politi politico's chief white house correspondent joins us. you write that banks will step up whether thn they go into thi meeting. what does that mean? >> they want to go in and tell the president they want constructive actionable measurable responses to what he's saying including an announcement of additional programs for small businesses. of course, goldman announced the
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10,000 small businesses which will promote investment loans to 10,000 business through community colleges. we'll hear more about that. on the president's side, last night we heard him on "60 minutes" making bankers black cats so today he'll be more measured and tell bankers he wants to work with them. >> explain the political c calculuos. don't they look at the platform he's providing to make a lot of money and say that's hypocrisy? >> they felt like the meeting was half wood shed and half what can you do for me to help things move forward. they'll take him at his word. president will go in and not single out any bank. in fact, he's going to without
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naming goldman he's going to praise goldman for changes in compensation structure emphasizing stock more than cash so executives pocketbooks depend on shareholder results and say he wants more institutions to move in that direction and he's even going to acknowledge the banks concern that regulators have gone in the other direction and have gotten overzealous. bankers are frustrated. regulators tell them to be more careful. white house wants more. >> we heard from bankers recently who off the record will say they think the relationship with the white house may be isn't as strong as it was in the past. what do you hear from the white house perspective on this? are they worried about those relationships? >> that's part of the reason for having this. they decided to do this meeting separately from that jobs summit earlier. they were thinking of having them all together. they want to tell the banker story separately. the president is going to have
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cameras in there and he'll say that he wants -- that he believes banks although they have a special responsibility because of the bailout funds that they have gotten but you will not hear the sort of tough talk that you saw last night on "60 minutes." he won't embarrass any of them in his house. >> if you were a ceo of a nonfinancial firm, would you be feeling like a fat cat at this -- is it just people that may have had culpability in the financial crisis or anyone that makes a big paycheck as a ceo is fat cat? is there a general animosity toward highly paid ceos from the administration? >> we have some obese cats and some just merely hefty cats but what you're pointing to is frustration that we hear from people in different sectors who feel that the white house occasionally goes out and does
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populous rhetoric not affecting what's going on inside. you'll hear the president going into midterm elections knows that. wall street is an easy target. >> las vegas is reeling from the same type of thing. sometimes it's counterproductive to what we want to do here. you want businesses to do business travel. it's nice to take a shot to score a few points but not if you defeat what you're trying to do in the economy. >> that's a great point. the white house backed off from some of the comments they made about travel. he invited the travel industry into the roosevelt room to meet with valley jarrett to say we want people to go to conventions. there's been a calibration issue. the white house continues to struggle with that. that's why we see the difference between doing what the president said last night and what we'll see him saying on camera today. >> does it feel like the citi thing will happen today?
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>> it could be announced as early as 6:30 a.m. so just a few minutes from now and this could be announced and it sounds like the government believes based on dividends and profits over this time that they'll come out of this deal $10 billion ahead so they say this is a good story and citigroup's dick parsons will be one of the attendees today and tell the president here's your check. >> pait's a treat having you on the show. talk to you later. monday morning strategy session and then a little later, it's been quiet on the megamerger front for most of 2009. will things turn around in 2010? we'll look at possible takeover targets. let's take a look at some of last week's winners and losers.
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making headlines on this monday morning, cadbury d dismissing the hostile bid from kraft foods. cadbury raises the long-term sales and margin growth targets
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today. google reportedly plans to sell the own cell phone directly to consumers as early as next year. it will be called the nexus 1 made by a taiwan based company hts running on the search giant's android operating system. fed ex predicts that will be the busiest day of the year. it's two mondays before christmas but this year the company expects it will be more robust than it was in 2008. fed ex projecting 50 million packages will move this week. carl, back over to you. >> thank you very much. time for monday morning strategy session. are you looking at this? that's serious. >> we did that for you guys, man. >> craig thomas, senior economists for pnc financial and
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william burn, good morning to both of you. let's try to put the week in context as we get going. a fed meeting. inflation data. near term it looks like the abu dhabi move is at least putting some of that risk trade back on today. >> the great thing about abu dhabi and dubai and what happened is it gives us a really interesting example of what's ahead not only today but in the year ahead in the sense that dubai world is nothing but a commercial real estate investor and developer and dubai is nothing but world's riskiest commercial real estate development. we're going through the process of now recapitalizing it through what abu dhabi is doing today but we'll do this 100 time over in the next year as every commercial real estate investor needs to recapitalize or refinance. this is the process that will take place. we are going to recapitalize but it's taking capital away from
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other more productive uses. this is going to be one of the big challenges that the whole economy faces. >> can the market dance between the raindrops as they fall over the next few years? >> i think it will long-term. from what we see right now, bottoms have been consistent like going into the seasonality factor. the abu dhabi/dubai will get us through the year end and the push. >> some say lower quality names are flattening out a bit and echo of what we saw in july and we know what happened after july. do you think that we can break out of this 300-point range that we've been in all month? >> it's tough. people have been focused on that level and they really are looking for a catalyst. we saw good numbers on friday out of retail sales numbers. people are digging into that. i think now this morning the abu
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dhabi situation that investment could be again a bit of a catalyst to push it forward. >> people look at retail data and consumer sentiment data and some of the industrial production numbers and that's all good but others say we'll get a fed meeting and people are looking for a rate hike in september and the free ride will be taken away in the next 6 to 9 months. is that true? >> the economic data is getting positive enough that it may prompt the fed to move more quickly than they otherwise would have perhaps but i just don't expect anything. everything is so tenuous right now that no one wants to scare anyone away. expect that the fed communications are going to be essentially deni lly benign. >> over the weekend there was a couple saying there's a market strategist sending him notes calling it exactly right when things were about to collapse back in 2008 called it exactly right at the turn of the bottom said this is the time to jump back in. he said the person doesn't want
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to be named but right now -- >> i think he's a broker. >> someone sending him this stuff. >> and he did it again in july said you should jump in on this. he says right now he's very positive about things still. again, the guy doesn't want to be named because he doesn't want to be out there in the column. >> you found me out. >> congratulations. >> to hear that this is from someone right on both the peak and the trough of this. does that make you think maybe there's more room to run and maybe not necessarily a time to be cautious? >> i definitely think there's more room to run. people are looking for that next upside. people are underweight equities. i think that we're positioned and recovery is on track. >> we don't need to go through the list of people who don't think that way, right? >> no. >> they are very high profile. we get plenty of mail whenever we challenge it. >> i want to find out who this person is. >> i don't think you would know his name. in reading sounded like he was a retail stockbroker that manages money and who happened to have a
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good pull. if you just purely base what you've been talking about based on sentiment, since march and july it's been straight up. it's been straight up in the face of all of these experts saying that it can't continue. >> what about flow of money leaving equities and going to bonds? >> i can't imagine anyone going into bonds. >> how much money has gone from equity into bonds? >> maybe corporate bonds. >> is that a good thing or a bad thing? >> people are looking for a bit of income and appreciation and bonds make sense there. also, the other situation with bonds priced like the world is going to end. the world won't end so recapitalize the bond side and stock side. >> abu dhabi is one thing to not worry about at this point but greece is showing up where people are worried about will the prime minister move fast enough and will we hear strict enough measures and you can run through the pig countries rest
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out there. are those things you think will be resolved? >> almost night and day. dubai is commercial real estate and speculative investing and abu dhabi stepping in to help them out. greece and eastern europe is sovereign issue. if you think about the whole economy and what we've been doing, we've been doing a lot of balance sheet repairing. households have been aggressive repairing their balance sheets. saving more, bringing down debt burdens. industry doing the same thing. painful layoffs. earnings are coming back around. there's one part of our global economy that's not repositioned its balance sheet and that's government. as a result we have governments that are looking like the subprime borrowers of the housing boom area. >> thanks for your time. thank you, both. >> what is $10 billion? >> to them? >> that's one month at 140. that's one month of gouging for
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them. >> oil down eight straight. >> still 70. it's been up there. been locked up there for a long time. they've been raking it in. i think 10 billion is the least they can do for the western world if markets are shaky. don't you think? come on. step up to the plate. they did finally. squeaking as they write the check. coming up, more on this morning's top stories and what will traders be focusing on this week? economic data? the fed meeting? pictures from future pits and all of this when "squawk box" comes right back. ♪ throughout our lives, we encounter new opportunities. at the hartford, we help you pursue them with confidence. by preparing you for tomorrow. while protecting what you have today. you've counted on us for 200 years. let's embrace tomorrow.
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good morning. welcome back to "squawk box." i'm joe kernen along with becky quick and carl quintanilla. president obama is meeting with executives from the nation's biggest banks including goldman sac sachs, jpmorgan chase and citigroup. they predict the economy will start creating jobs by the spring according to the administration's top executives. >> the key is not just growing again. we have to grow robustly. that's how you get a lot of job creation and how you get a lot of progress on the unemployment rate. >> these things happen in stages. first gdp goes up. that's happened. then hours worked by workers who have jobs go up. that's starting to happen. then employment goes up. we got very close to that this
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month with only 11,000 jobs lost and then unemployment starts to come down. >> the president's meeting with bankers scheduled to start at 11:10 eastern. he'll make a public statement about the economy. >> we're just getting word from citigroup. an agreement that was expected over the past week or so. citigroup and u.s. government agreeing to t.a.r.p. we payment. citi will issue 17 billion in common stock and 3.5 billion of tangible equity units paying back $20 billion of t.a.r.p. trust preferred securities. again, they will sell -- u.s. treasury will sell $5 billion of common shares. s they plan an orderly exit. >> over the next 6 to 12 months. >> citi substitute substantial common stock for cash compensation. it says in terms of what they're paying executives they will
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cease to be beneficiary of t.a.r.p. exceptional financial assistance beginning in 2010 but they do say that they will issue substantial common stock for cash compensation. again, the big sticking question over negotiations had been how much common stock the company would reissue to get the government out to be able to repay that t.a.r.p. and issuing 17 billion in common stock and 3.5 in tangible equity units. >> we plan to exit when we were convinced it's prudent to do so. citi is among the strongest banks in the industry and we're in a position to support the economic recovery. they point out that in '09 they provided about 458 in new billion in the u.s. through the end of october. >> that will be one of the big questions today as joe was talking about with bankers headed to washington to meet with the president is exactly how much money is given out. some people we've had on this program who have said they are concerned about the t.a.r.p. being paid back by many of these
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big institutions worried about if there's a second downturn and what would happen. again, those comments made saying they're confident they no longer need this money but questions have been raised. >> i'm amazed that the stock with a big market cap -- we had a guy on today that called citi a zombie. the stock has not gone down that much even though this has been out that this would happen. we know it will be $20 billion worth of stock on a $90 billion stock you would think that -- someone is willing to step up and buy these shares at four bucks of citigroup? people don't -- nobody does this -- they're not the red cross when people decide to take a stake in citigroup. that's a pretty -- that's just a huge difference from where we were six months ago. you have to look at that as a positive sign to bring in that
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much money from private investors. >> others would argue why would you not want to buy a piece of a bank guaranteed that they will not go anywhere. they're not going under. >> it can be guaranteed but you saw what happened with the equity with shareholders of general motors. general motors -- they are going under actually. this will survive but that doesn't mean the shareholders survive a lot of times. we didn't nationalize that bank. that's one of the -- >> smart thing they did. >> do you feel a sense of closure? i'm serious. the beginning of this madness began -- >> they have more to do. >> are you feeling like you finally have gotten dirt out of your shirt? >> i wish i could. we have rosenberg on and then i want to blow my brains out again. i'm hoping. i think that's more consensus now to have double dip and this is not a v, it's a l.
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bears get plenty of -- we get criticized for anything positive. bears have been getting plenty of press. >> more upward revisions to q-4. something close to four handles. employment leading indicators which we'll see this week. >> one thing over the weekend really hit me. christmas tree sales. >> saw that. >> huge. >> on the journal cover. >> last year worst year ever. they never thought you could have a year like that. worst since the '30s. already up 6% this year. average price up a lot more. we'll see. >> that was on "the journal's" cover on saturday and next story are santa claus hearing from kids they want socks and a job for daddy. that's the other side of the picture. back-to-back editions. >> at 10% you can find those
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stories obviously. antidotes. overall if you look at -- maybe the consumer is not as bad off as -- >> that's been the early indication from retailers. let's talk more about what's shaping up for markets this week. among highlights you have inflation data coming out. a fed meeting that's here. george is at the cmu group this morning. george, we've been talking about th this news from citigroup. they're issuing more stock but not a negative impact on shares. good news they're getting out from under the t.a.r.p.? >> it's probably good news if anyone is getting out for the taxpayers and so is it going to be market moving as far as broad market goes? i don't think so. we've had a lot of bad bank news. this is okay to get out from under the t.a.r.p. it helps them move toward. you'll see citi move down but i don't think it affects the broad market. it will be more affected as we
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come into inflation numbers a bit but everyone will look closely at the statement out of fmoc. no one expects much but you talk about the big story on currency section today about how the dollar has benefited from people moving forward their expectations for a rate hike and i think it's still a ways off but if you look at the fed fund strip there are five basis points priced into december for next year. is that a little aggressive? it may be a bit aggressive. for me i think the statement out of fmoc is the focus and not commentary surrounding what goes on with citi. maybe a bit today with the fat cat meeting with obama today as well. >> something to watch coming out of washington today. what are you going to be watching for from the fmoc meeting? what specifically are you looking for in that statement that you think they may change or add? >> i think it's just going to be a general feeling of their comfort level for the data we'vv had in recent period.
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it's been better. do they think that's going on or do they need more strong data? we established a base to move forward. >> bernanke wasn't as optimistic as some people thought he would be after we got the employment number that was better than people had been thinking. this is when he was speaking last week. he sounded more pessimistic than people expected. would it surprise you to see that same sort of thing come out in the fmoc statement? >> it would be prudent if that's what the statement was like. that unemployment number was great hands down for expectations but we have unemployment above 10%. that's not a great number. i think any sort of prudent observer will say, well, things are looking more stable but unemployment is above 10% and until we start to correct that, i think they'll be cautious
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rather than be -- if you had a 12-month window where they would increase the feds funds rate, i would guess toward the back end of that 12-month window rather than the front end for safety sake. >> we would love to hear from you if you have questions or comments. when we come back, making a deal in the new year. again, citi is now out of the t.a.r.p. we'll talk more when "squawk box" continues.
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a long road for citigroup but this morning the bank and
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the government and regulators agreed for citi to repay the t.a.r.p. they'll repay $20 billion of t.a.r.p. trust preferred securities. 17 billion in common stocks. 3.5 billion in tangible equity units. the bank said they would do this when this when it was prudent to do so and big news today. we'll see what happens with stock. >> you can't help but remember the last time it was five bucks and that's what made the guy's name. it went to $50. he bought it at $5. if it's zero interest rates and they lend at 5.5% to 6%, can't they figure out how to make money? they can do it if they're not idiots and blow their foot off. >> yeah. >> obviously people are thinking back to the first time that happened. everybody wished they bought citigroup at five bucks first
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time around. it made a round trip. '09 an overwhelming year for corporate dealers and buyouts. brighter days could be ahead in 2010. we've already seen a lot and i guess that's kind of a sign of things to come? a lot of big deals in the last couple of quarters of 2009. >> yes. we're pretty optimistic for 2010. we focus on the middle market where over 90% of the deal flow resides and it's often times an early indicator for deal flow and we're optimistic on 2010 over 2009 and one of the drivers is just the cyclical trends of demand and supply for deals. we see pent up demand and pent up supply of deals. if you look on the demand side, private equity groups have more to spend than ever before and
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corporate balance sheets are cleaner than before ready to acquire companies and on supply side they have waited to sell companies for the last couple of years waiting for better market and when these two curves meet, you can really have a dramatic recovery and we're optimistic for 2010. >> what was the biggest year ever and how did '09 compare to it? >> probably the biggest year ever was around the 2007 range. surprisingly in the middle market 2008 was really a terrific year. i think in the big deals you hear about how 2008 was sudden decline but that's one of the nice things about the middle market is it's more resilient and doesn't swing as much as big deals that you see. >> i don't know if you saw the article on how many deals buffet passed up. that was a huge deal. the burlington deal. that's got to portend a more
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comfortable environment i would think for just -- that's a railroad. that would mean just about anything is possible over the next year, no? >> you know, he said he was betting on the american economy. that's a pretty big bet. you know, probably a good bet. if you buy something like that at the bottom of the cycle, it's a good time to get in. where we see the drivers and some of the industries that we think are leading us out of this market are in technology, telecom, digital media, health care, energy and power. for us those sectors are as busy and active today as they ever have been regardless of the cycle. >> that's every sector. that was across the board, right? >> not really. technology, health care, energy and power you have a lot of capital goods and industrial consumer products. those are lagging right now in this economy. >> those are the ones even though we see some stuff there, too, you know.
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sarah lee or stanley. we see it across the board. that portends good thing for the overall markets you would think. >> it does. i think it just shows the stability. people used to be worried that the market was declining and couldn't find the bottom. i think everybody has found the bottom. that's generating some additional volume. you know , the other thing we se is globalization particularly in the middle market. it sounds silly but with cell phones and e-mails and videoconferencing, it's made the world a very small place particularly in the middle market which is a new trend. last week we announced opening a london office which we think will give us good global reach. >> you won't pay anyone more than 100 grand over there. that's already. thank you. appreciate your time. 100,000 pounds maybe. appreciate your time this morning. see you later. >> thanks for having me. >> did you see that? yeah.
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50% on the anything above -- >> the u.k.? >> yes. stay with me here. i don't know if he knows about that. they may not open that office over there. >> the bank is paying it not the bankers. coming up, we'll follow the money. the sponsor that are distancing themselves from tiger woods. at the top of the hour, congressman paul ryan, the ranking member of the house budget committee and sits on the weighs and means committee. today he grabs the squawk gavel as our guest host. stay right here. (announcer) they've been tested, built and driven like no other. and now they're being offered like no other. come to the winter event and get an exceptional offer on the mercedes-benz of your dreams. it's our way of showing a little holiday spirit. hurry before the offer ends january 4th.
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♪ shot through the heart and you're to blame ♪ ♪ darling you give love a bad name ♪ monday morning and we have band bon jovi. we're back in the chairs. since we last sat here on friday, there have been -- there have been a number of major -- i can't even talk with this on. ♪ >> darren joins us with the latest. accenture was the one that a lot of times we said, that's blue chip and -- >> it's a business to business. >> yeah. and you look at the campaign that was run, integrity, knowing -- >> a lot of double going on. >> in the tall fescu.
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he's not a snake, but -- >> go on, be a tiger. >> what you do next counts. >> yeah. and they couldn't take those down from the airports fast enough. that's why the irish book maker, they were taking bets on this, saying accenture 9 to 4 odds would be the first to drop him and they did. you know, i think the fact they made a statement, they had to make a statement. that does say something. i it's not like they're going to quietly take them down at 3:00 in the morning from all the airport light boxes. they have to say, we're no longer associated with him because it is an image thing. >> as opposed to gillette which said he's going to have limited exposure. >> right. gillette's contract is still going on with him. instead of going away from him, we're going to go away with him. we'll see how long that lasts. i mean -- >> those guys are half naked in the gillette ads anyway. he's halfway there. i just had a thought about ea, just expand the video game. you know, instead of --
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>> now you can play with a virtual tiger. he might be the only tiger in 2010. >> instead of just staying on the golf course the way the video games are, if they -- >> like grand theft auto. >> he leaves, he goes to a club, he heads to -- >> oh, man. >> i mean -- >> i'm not touching that. >> mature audiences only, right? >> yes. >> will you plain -- >> it would be a better video game. >> you know nike well. what are they thinking in the marketing meetings right now? why is the situation at nike different than accenture? >> they realize their golf business is totally tied to tiger. it's a $650 million business. that tiger built up. if they're ready to give that up, then they should, you know, give it up right now and undo the tiger deal. remember, they have some experience in this with kobe bryant in that when he was charged with sexual assault, that was days after they signed him to a five-year, $45 million contract. days. and so they know the strategy of, going away and coming back. that being said, there are no
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comparables to anything. i mean, this is exsonian fall. if you trying to figure out who's going from the height of the heights to the depths of depths this fast, it's -- it's not even in sports. it's out of sport. we don't know when the story's going to end. >> but -- >> not from those heights, really. >> well, he went from being a former governor -- >> but in terms of wealth. >> right. nolan ryan -- >> we all liked o.j. until we found out he cut off someone's head. >> winning is redemptive but can he get to the point of getting back? that's why friday's announcement of a -- we always knew it was indefinite but friday's announcement of, this is a statement about indefinite, i think -- >> let me ask you this -- >> people said, why don't you get back on the golf course. if you're one day closer to the golf course, that's the only way to undo this. >> you're a realistic person. knowing what tiger means to the pga tour, to professional golf
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and to the networks that pay big bucks to cover, it what -- this is in no way enough for them to ever cut him loose. there's -- i don't know what -- he would almost have to pull an o.j. for the pga tour to -- he's so important to that tour and to the networks and to the coverage. >> joe, you know -- >> nothing he's done so far could have them pull -- >> you know there's never been a person more key to a sport. >> no. >> not even jordan. jordan, yes, the finals ratings went from an 18 to a 12, but this is 50% cut when tiger's not there. >> this would have to get a whole lot worse. >> the other part that's key here is, this is a tough time. the pga tour, more than ten of their deals for title sponsors are up in 2010. at 2012 all the tv deals are up. they're going to start talking about that, you know, at the end of this year. they might have to delay that if tiger doesn't come back. so he's very important.
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>> i can't even imagine tiger is capable of the stuff for the pga tour to cut him. >> is there a possibility he might never come back? >> no. >> no. >> okay. >> i hope not. i wish he'd -- you know, i want him to be able to take some time off, like larry and redeem himself, but i sure hope he's there for the masters. >> for pebble beach. >> i don't think he's going to be there for the masters. >> maybe not the masters -- >> pebble beach, u.s. open at pebble beach, dominates. >> thank you. we'll talk to you later on. when you come back, your monday morning business headlines. making his way to the set, congressman paul ryan, from washington to wall street, our guest host.
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alright, so this tylenol 8-hour lasts 8 hours... but aleve can last 12 hours. and aleve was proven to work better on pain than tylenol 8-hour. so why am i still thinking about this? - how are you? - good, how are you? aleve. proven better on pain.
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bank rz get to meet a first-rated president obama. >> i did not run for office to be helping out a bunch of, you know, fat cat bankers on wall street. >> find out what else the nation's top banking professionals can expect from the white house today. citi trying to get out from under the t.a.r.p. is the move by the nation's bank a big risk to the financial system? and the vice chairman of the fdic on the state of the banks, the rate of failures and why the number of americans without bank accounts is growing. "squawk box" begins right now. good monday morning, welcome to "squawk box" here on cnbc. i'm carl quintanilla along with becky quick and joe kernen. on the box, banking on america, the ceos of the nation's largest
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banks go to the wous today. the focus, stimulating the economy, lending, financial reform. we have it covered. shei'l sheila and we will get your monday trade on, get the latest info on gold, dollar markets from our trading block. citigroup and the government reaching a deal to pay back some of the bailout monday. citi's going to be issuing $17 billion of common stock, another $3.5 billion of tangible equity units and terminate the loss sharing agreement with the united states government. u.s. treasury department will be selling up to $5 billion in common shares. planning an orderly exit over the next six to 12 months. as of the year 2010 the bank will be -- will be out from under the watch of the pay czar. we'll be talking to a couple of analysts if there is a good idea or not. citi shares not under a whole
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lot of pressure under this. the bid's at $3.84. ask is at $3.85 after closing at d $3.95. terms are officially out at this point. abu dhabi offering $10 million in surprise aid for dubai world. dubai is still warning that creditors need to approve a standstill on outstanding debt. equities in the region are rising on this news, though. dubai's benchmark stock index up more than 10%. also cadbury is holding private talks about the possibility of a friendly bid with hershey. >> the bid is not right, significantly undervalues the company. multiple of around 11.6 times versus multiples which have been at 14 times plus in deals
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historically. this really does undervalue the company and the growth potential that we have. so we believe shareholders should reject the bid and focus on cadbury as an independent company. >> they had rejected kraft's offer in the past calling that bid inadequate. let's turn to our guest host, one of the rising stars of the gop, which views itself, i guess, trying to revitalize itself. paul ryan, congressman paul ryan, ranking member of the budget committee, member of the ways and means committee. also, you know, we have canner on once in a while and, kind of a sad thing that we can definitely use one hand to count the rising stars of the gop. isn't it, congressman? kind of a commentary. >> what matters more is our ideas. >> i have some fingers left over. i have some fingers left over on my one hand. >> as long as we're putting out good ideas based on core principles, that's what counts. who cares what the personalities are. >> you will be talking about --
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you'll be disagreeing with some steps the administration has taken, so that will give you some fair warning. we are seeing this -- you saw "60 minutes," fat cats, bankers headed to see the president. the president is probably upset that small business has gotten shut out of a lot of loans. and that would be what one side of the aisle says, that these guys are -- don't have any money to lend because they're paying themselves bonuses. others would say small businesses are so unsure about their future, given health care and cap and trade and everything else, tax policy, that they're not hiring because of that. i guess you'd take -- you'd be in the latter camp? >> what we have here is a staged rhetorical onslaught sweeping bank population. friday we just passed the bill to have the federal government more or less take over the financial sector, have a permanent t.a.r.p. kind of a system and so, yes, there is a huge small business credit crunch under way. that's clearly occurring because
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of economic issues. the big economic issue as you mentioned is the uncertainty. small businesses don't know what their tax rates are going to be this year. they know in 2011 they're going up. we're passing a bill that brings tax race in wisconsin. so you have regulatory uncertainty. cap and trade, they're trying to sweep that through. they're saying if you don't pass this in congress we'll have the epa do it anyway. what is a small business going to think about the future where you have the spector of all new regulations and taxes on the horizon? there is a credit crunch. policy makers in washington saying lend. you have examiners at the bank saying tighten up, hold onto your reserves. there's a legitimate credit crunch occurring out there. i talked to one of the biggest bankers in wisconsin the other day who told me of all their existing business lines of credit out there, only 22% of it is being tax ining tapped. that's an unall-time low. all the medium and small businesses with lines of credit aren't getting that money from those banks they can because
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they are unsure about this the future. they're hunkering down and not depl deploying. >> we talk to businesses and they say the reason they're not taking some loans is because there's not demand out there and they're not -- >> that's what i'm saying. well, they're also hunkering down because they don't see a bright future. why would you take ricks, expand, hire more people if you don't think the future is bright, or if it's really uncertain? we know the fed's going to tighten at least maybe mid-2010 -- >> is it fair to tie that out to say they're concerned -- >> yes. >> or they're saying, look, i'll order those things when i have more people come in. >> one proceeds the other. the reason we're not shooting out of this recession -- usually the bigger the recession, the bigger the rebound. the reason we have a small and short-lived recovery that's shallow, you know, 3% growth, is because of all the policy uncertainty out there. huge tax increases on capital, huge tax increases on income, more regulatory stuff. who knows what the health care
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sector's going to look like. we might have a 23% payroll tax in this country if this pay to play tax in the health care bill succeeds. so with all that policy uncertainty, on what your tax rates are going to be, no wonder the dmi is not shooting out of this recession like a sling shot. >> but you really think that they -- they saw the frank bill as a smoke screen, they decided to ramp up the populous rhetoric? >> we passed the -- >> it's diabolical, though. >> no one is paying attention to this issue but, yes, absolutely. we're talking about bank pop lichl. i have my concern about big banks as well. i'm worried about a new system of cronyism where the big boys cut the deals in washington and small guys are left on the sidelines. i'm worried about -- >> it's already happened. >> but i'm worried about enshrining it permanent with a permanent t.a.r.p. system which is basically what this financial overhaul bill is. it's passed in the house. no one in america knows what it
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is. they're trying to move it through senate. i think they're invoking bank popularity. take over the energy with cap and trade, take over health care, trying get this bill through before christmas. government agency budgets are up 24% since fiscal year 2008 and get this financial modernization or bank overhaul in place before you get into the guts of an election year where it's tough to pass things. yeah, we have a very ambitious government that has moved deeply left of center and they're trying to move this agenda through very quickly before their votes start slipping away from them. >> you don't like anything they're do, paul. you're going to have to step up here and say that -- >> well, you too. >> i'll try. >> that's the journalist you are. look, i mean, you criticize the economy for not rebounding like ail slingshot. we're very close to positive jobs growth. you see the news about citi today. the t.a.r.p. will -- do you give the government credit for anything in the past 12 months? >> not in policy. >> do you remember what it felt like when you sat here in march?
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>> right. i give the american economy credit, the entrepreneur credit for,ing resilient. >> that's like saying it's a great movie, it directed itself. >> and the economy normally does. macro economic policy, it's the wrong policy. higher taxes, higher regulations, far more spending, all on borrowed money, which is going to give us a huge debt problem in this country, which is going to debase our currency. we have a weak dollar policy right now. these things are bad economic policy. for the medium and long run. and i would argue also in the short run. and so when you're conducting this kind of economic policy, which really does put the federal government more in firm control of the economy, that's not good. and that is why i don't think we're having robust growth going forward. >> president gives himself a b-plus. you give him -- >> well, i'm not a big grard but it would be below a "c," i'll tell you that. >> there used to be incompletes, too, right? >> maybe. >> look --
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>> fapass/fail. >> i was hoping he would be a centrist. none of us knew him because he was sort of new. you feel, what we find is a very, very left of center government here. >> two hours to toss all this around. it's going to be fun on a monday. any comment or questions, drop us a note. our address is still ahead -- washington and its impact on the banks. we'll take a closer look at whether names like jpmorgan and citi should be in your portfolio. now that citi is out of the t.a.r.p. later, the vice chair of the fdic will talk about banks and why the number of people without bank accounts is in this country growing. time now for today's aflac trivia question. what was the first american novel to sell 1 million copies? (sneezing): ah-choo! hope i don't miss work this christmas. yeah, how will you pay for things like food...electricity? dental bills... gazooks. you need a back-up plan
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ho, ho, ho. that's why we have aflac! so i'll have cash to help pay bills! great...but what if you're still not better by christmas? hmm... afllaaccccccccc!!!!!!! (santa): aflac. we've got you under our wing. rudolph's better... but now blitzen's sick!
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now the answer to today's aflac trivia question. what was the first american novel to sell 1 million copies? the answer, "uncle tom's cabin" by harriet beecher stowe. take a look at futures this morning. we got a little risk trade back in action after the government of abu dhabi is giving a $10
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million infusion into dube world. you shake your head. >> well, you know, they vacation there, they got all the oil money, they got all the big apartments and ferrari dealerships and indoor skiing. they built the place. they've got all of our money from $140 oil. they can't give $10 billion -- thank you. big of you. thanks. that's really nice. i mean, wow, abu dhabi. step up to the plate. >> it's helping this morning. fedex predicts it will be the biggest day of the year. they expect it to be morrow bust than 2008. fedex projects 13 million packages will move today, taking off a week it expects to move 50 million parcels through the system. beijing automotive has acquired some assets of gm saab's unit. >> you owned a saab? >> i did have a 93 a few years ago. >> and you admit it? >> it was a good car. what are you driving right now?
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to do you want to tell people? >> i have a -- you mean the ford flex? >> yes. >> i have a ford flex. >> and you're proud of it. >> i'm going to salute and play some american music. i do, yeah. >> buy american. financial -- >> you're not going to buy swedish. >> financial details of the deal were not disclosed. meantime the president is going to meet with executives from the top u.s. banks today, including goldman, jpmorgan, citi -- >> buy swedish. i haven't heard that. >> john harwood joins us this morning. we've been listening to the quote from "60 minutes" last night, the fat cat quote and we're wondering if there's going to be a big box of kitty litter when they show up at the white house today. >> i think the administration is going to be very happy to slap around the banks a little bit. you heard some of larry summers yesterday, rahm emanuel saying it's time for the banks to step up and help the country the way congressman ryan thinks the administration is helping the country right now.
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and, you know, the administration wants to pivot, as we get to the end of 2010, to have a single focus in -- i'm sorry, at the end of 2009, to have a single focus on jobs. they're trying to put some of the onus on that on banks and their failure to lend, especially to small business. that's part of what this jobs package is going to be. >> so, can the banks walk out of this with -- can they bring something to the table today? can they announce something new beyond sort of the multi-year measures that say goldman has announced in the past few weeks? >> you know, this is a job-owning meeting, and so they can do a little job-owning of their own when they come onto the driveway of the white house and talk to us and indicate they got the message, they're going to step up and do their part. but i don't think there are going to be any particular programtic commitments by these bankers inspect is about the administration trying to exhort them them to do more and
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leverage a little populous anger you were mentioning. so many people are saying wall street got a bailout. where's my bailout? now the administration is trying to say, we're going to use some bailout money for that purpose, but it's also about telling bankers to behave differently. they're also girding for these year-end bonuses so they can tell the american people, yeah, we talked to them about it. ken feinberg is doing his part. everybody is exiting the program. >> john, is this supposed to be about taking them to the wood shed or building some sort of relationship to try to improve things? >> both. >> i mean, how do you do that and say the night before on "60 minutes" that these guys are a bunch of fat cats? you know, this is the type of arena where everything that he says is reported instantaneously, not only over, you know, television outlets and radio outlets, but over the internet. you can't really speak out of both sides of your mouth. >> well, that's true. these bankers are big boys. they not, i think, what the mood of the country is right now. they also understand the kind of assistance they got.
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you know, i remember interviewing neil cash kari several weeks ago and he talked about coming out of the bush administration, that some of these bankers were not fully appreciating both what had been done for them and the need for that to be done. and he said that they need to step up to the plate. the president's trying to reflect some of that same view, which to some degree is across the board. >> how does the president get around the issue of the problem initially was a result of banks lending to people who were not worthy. why are the -- are the banks now under pressure to start lending to people who may or may not be worthy? >> oh, i think the view of the administration is that the banks are not lending right now to some credit-worthy borrowers. so, you know, you swing from one extreme to the other. and they're trying to loosen that up a little bit. partly by paking money available. but also partly by saying, look, you can't overreact to the situation and sort of turn off
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the spigots. >> you're going to talk to them as they come out of the white house today? >> if they stop and stalk to us. we hope they will. you know, they may have their tail between their legs and may be running away to their limos. >> you'll get them. we're counting on you. >> we hope so. >> we'll talk to you later. citigroup reaching a deal with the government to pay back some of its bailout money. joining us from chicago is jeff hart, a sandler o'neil senior managing director and on set chris whalen, sister manager of senior risk analytics. krishgs y you think this is reckless, the idea to allow citigroup to pay back the t.a.r.p. why? >> you should be taking advantage of market conditions. the markets want to buy bank stock, you sell it to them. until we see what peak losses look like in the industry, i think it would be more prudent for the government to hold off. very simply, whatever the banks take in reserves at year end, i think they're going to consume next year. they're going to have to replace that. i'm talking about the entire industry. by the way, to the point about lending, the loan book is
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shrinking in the u.s. $200 to $300 billion a quarter. banks are hoarding cash -- >> and they've been holding back, too. >> the markets are saying, show me a lot of reserves. not a lot of high loss rate. you see citi burying losses that ought to be hitting their chargeoff line for expenses in things like mortgage banking. >> when do you think we'll see peak losses? >> i'm hoping second quarter. we've been pushing this out. we've been having this conversation going back over a year and a half. we were hoping we would see the peak this year. it hasn't happened. it's getting extended. what the banks are doing is they're trying to buy time. they don't want to see senior executives get shot. they don't want to see all of the disruption of what we've talked about here, which is dealing with this quickly, so we're doing it very slow restructuring process. and this is bad for the economy because banks don't lend when they're trying to basically muddle through. >> jeff, at the same time you
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think it's a good thing they could get out from being under this idea of extraordinary assistance, having that label on them, if they're one of the last ones who still hasn't paid back the t.a.r.p.? >> yeah. it becomes a relative issue and if you're the one big bank that has the label on you, it's going to hurt you in business pitch, obviously. but also being subject to the pay czar, which puts you at a disadvantage on what you can pay your top producers, specifically in the investment banks. don't get me wrong. it's a lot of extra dilution. at the end of the day it was coming. it was a matter of when it was going to come and this get it out of the way so citigroup can compete more like its peers. >> the bid/ask is only a penny lower than where it closed friday. the market's already built in these expectations, jeff? >> we knew it was coming. it was a matter of when was it coming. paying down adds more capital to the equation than most people, including myself, entered in as necessary at this point. we knew it was coming.
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it was a matter of when. the market's largely priced in. this is an important thing as far as getting institutional investors reengaged in citigroup. it's very underowned now. getting rid of the t.a.r.p. tag and if the government can sell some shares, too, i think that will be a watershed event, start bringing institutional dollars back into citigroup. >> jeff, for some reason, a, the sequel, citigroup, the sequel, at five, remember, last time, there's just no way that movie can end the same way, is there? could this be a $4 stock that is a $40 stock in five years? >> i mean, for anybody that owns citigroup, i'd love to tell you it's a $40 stock in four years -- >> is there any way it repeats histories like it did last time? or even could it be a $10 stock, $15 stock? that's why they're buying it, right? >> if the economy is at all cooperative and capital markets are confident, yes, i have confidence it will be $10, but $40, it's tough to say. even if it's an $8 # # stock,
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there's a lot of upside there. >> i hear you. >> here's the thing, you're going to see more dilution next year with citi. the reason is we'll be dragging out the loss process and restructuring process well into '11. so what you have to think about here is not, you know, how does a bank look with the fed manipulating the market with zero interest rate policy, as we talked about before we came back on, the fed has bought the bontd market. they've been buying 2 to 1 versus current productions in mortgage backs. when they stop doing that, the duration of the market will appear and you'll see that, spreads, especially. >> you don't think this is the last time that citigroup's going to have to go back to raise equity? >> no, i think they all need more cash. i'd love to sit here and stell you that i see improvement. but what i see is investors looking for liquid havens, the large caps, and with the banks that are actually performing better. even u.s. bank, the fifth largest bank in the country s a lot less liquid than citi.
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the big players on the buy side don't like it. they don't like my -- my positives right now are big banks. cullen frost is a good performer but a tiny stock. what you've seen because of the fed manipulation of interest rates, the liquidity in the entire global market's been going into equities and into large cap equities. the buy side wants citi to be rehabilitated because it's a big stock. >> to get the institutional investors back in. >> absolutely. >> jeff, what does chris see down the road thaw don't? why do you think things will be better? >> the key, at least my investment attitude on the space is, look at the money center banks, start looking at investment banks. i don't disagree, the yield curve is artificially steep. eventually that stops. we have a lot of commercial real estate stop pays. you look at money center banks as as a lot more fee income, and hardly any commercial real estate exposure compared to other financials out there. the money center banks are the place to be looking right now.
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>> i totally disagree. i had to downgrade state street and bank of new york, which have traditionally been the most stable. why? fee income. they don't rely on interest spread as much as big banks. what you see across the board, goldman, morgan stanley, the entire complex is the fee income side, the stuff you would assume would be stable is actually not. it's down. what i'm worried about in q4 and going into '10 is if we still see revenue lines showing instability we'll have to go back to the cost-cutting bucket. we've already done this. i mean, look at little northern trust, they beat their number, but by reducing noninterest expense by $500 million. we can't do this again. >> jeff, when you look at the trust banks, though, i mean, they're the most asset-sensitive banks out there. given their dependence on the money market funds business, i mean -- >> exactly. >> you have to look at what constitutes a fee business. there's a lot more real estate exposure in trust banks than people realize. >> you talk about yield spreads being steep enough for this financial rehab.
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how long can that last? into the third quarter of next year? what? >> very good question. who really knows? the government certainly has a vested interest in keeping rates low as well because the national debt's getting high. as long as we don't get really strong economic growth, which would be a plus, i doane we'll see it, but it would be a plus, a leap up in inflation, it could go on for quite a while. it could be a story throughout 2010. >> quickly, bank of america looking at bob kelly as potentially being the new ceo coming in. what does it mean to your thoughts on this stock whether it would be bob kelly or it would be one of the insiders who's been mentioned, gregory or brian moynahan. >> kelly would be a very good choice. very, very strong operator. >> what about kelly for notre dame? what do you make of that? >> i'm a villanova boy. >> he's a good coach. >> all right. gentlemen, thank you both very much. we appreciate your time today. >> when ableson puts you in his column, does he call you?
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lift it and puts it in? just like rosenberg. >> he may not even have a phone. >> "squawk box" will be right back.
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this is "squawk box." on cnbc. i'm joe kernen and this is becky quick over here. and this is carl quintanilla. the futures at this hour are are indicating a higher open this morning. as you can see, up 51. and i think fair value's down 14. so that's like 65 points. that, with the market at 10470 would be awfully close to a new medium high, intermediate high. we'll have the vice chairman of the fdic joining us with a look at financials. the handling of t.a.r.p. and bank reform legislation. in studio we have congressman paul ryan, a member of the budget ways and means committee. a lot to talk about this morning. but first let us go back to carl with the aforementioned carl quintanilla with the headlines. carl. >> joe, thanks. your top story -- why is this always so awkward?
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why do we have to do -- >> awkward? i was selling the heck out of it this morning. >> it is. we do this -- >> we're sitting right here. i mean,fy were in the field or in the control room -- >> don't you watch other organizations and the way they're able to do this all the time. >> i think news is changing, though. we don't go with that artifice, right? >> we usually don't until they tell us we must and then i do. >> some top stories. citi reaching a deal with the government to pay back some bailout money. issuing $17 billion of common stock, $3.5 billion of equity tangible. as of 2010 the bank will be out from under the watch of the pay czar. state and bank failures bringing the total to 133 #. they estimate it will cost the insurance fund about $252 million. when we come back, your tools of the trade. we'll talk oil, gold currencies. we have it ahead of the big week of economic news. the fed meeting, some inflation
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data leading indicators later in the week.
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welcome back. let's bring in our traders and take a look at commodities. joining us on currencies and
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boris. oil, we have stooen and let's start talking about oil because this is the ninth session in a row oil has been trading down below $70. some people take that's a key technical level. what's the next support beyond this? >> we have to say, becky, it's about time. a lot of subscribers wetic picked up have been asking, how comrie finers cannot make money? how is it valero shut down completely? why is it that sunoco is running south philly refineries at a fraction of capacity? the simple answer is, they can't afford crude oil at over $75 a barrel, $80 a barrel. the fundamentals up until this point have not been driving oil prices higher. last time i checked, we didn't have an oil refinery down at 85 broad street but behad one in delaware city. that's no longer the case. they cannot make money, becky. going forward, one of two things have to happen. bottom line is, the refiners, their margins have to improve
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better than what we're seeing right now. so, this correction lower in crude oil will continue relative to the product prices and these refiners can start making money again. or come first quarter we're going to see significant rise in product prices relative to crude oil. again, because we need to see that margin. which on a gas line standpoint is only about 10%. when you factor in all of the logistics, that doesn't get the job done right now. it's very interesting, though, a lot of wall street money is put on the sideline right now. it's amazing, you take those guys out of the market and look how far crude oil markets fall. >> where do we head from here, stephen? we're talking $69.22, that's a big dropoff over ten days ago. what's the next support? >> absolutely. there's two schools of thought. it's the wall street crowd, they're telling us oil is going to $100 a barrel and the fundemental guys, guys like myself, who thinks oil could potentially go below $60, closer to $50. now, it's interesting. a lot of the probability models
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that factor are giving a fairly wide band confidence interval between $100 on the upside for 2010 and $60 on the downside. i think it's very interesting that the wall street guys, all their predictions are at the upper end of the band but the fundamental guys, their predictions are below the band. again, there is an upward skew to the futures trading in this market. left in and of itself with the fundamentals, i think we could be headed back towards a test of the low $60 band in the first quarter. >> sound like producer like mexico are a little more convinced that people like you are maybe more accurate in their predictions. they hedged at $60 a barrel? >> exactly. it comes down to -- a lot comes down to common sense. we have petro brass, state owned oil company of brazil that said a few months ago they have their cap financed at $45 a barrel.
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if oil averages $60 a barrel they have it financed out for the next five years. quote/unquote, the president said he's happy with oil between $45 and $65 a barrel. yet in the same news cycle a wall street bank said prices are going to $110. who are you goioio listen to? the guy pulling it out of the ground, the refiner or wall street? up until a few months ago it was wall street. don't fight the tape. >> the abu dhabi bailout of dubai. good for equity markets but not the dollar. the risk trade is back on? >> it lasted for about three hours and it sort of came back off. actually, stephen is correct. if oil does go to $50, that's not good news for dubai because dubai, the role resuscitation of dubai is contingent on $70, $80 a barrel because they need overflow. so that's what i think the
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market took a look at after initial knee-jerk reaction to the upside and traded back down off the highs. that's where we stand right now. you know, as far as the dollar goes, it's interesting. joe was talking to me two weeks ago, he said when is it going to come a time when we good u.s. data and positive reaction. we're starting to see that dynamic take place. we had the good retail numbers and starting to see the u.s. dollar appreciate into those numbers against the rick trade. as equities rise, so does the dollar. >> what are you going to be watching this week? we have the statement coming out, several sets of numbers. >> f farm going to be the central piece of the week. the interesting, very small report will be the jobless number because i think the key thing here is we need more mo on joblessness. in other words, if we get better numbers on unemployment, that's going to create further upside momentum for the dollar as we go into the week. finally, end of the week we have the german ifa report.
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what's been happening in europe it's starting to become a big question mark about the sustainability of their recovery. they're seeing southern states, like greece today is coming out with resolution to their budget crisis issues. so the euro is starting to become more of a skeptical rick trade. and if the ifo report misses, it could be positive for the dollar as we go forward. >> boris, stephen, thank you very much. >> thank you. coming up on "squawk box" -- sheila bier's right hand man joins us in a first on cnbc interview why more and more americans don't have bank accounts. later, a mega round table will get you ready for 2010. we break down what matters most.
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welcome back, everybody. the futures at this hour are indicating a positive open. you're talking about those dow futures up by about -- better than 60 points above fair value. right now making headlines this morning. iraq wrapping up a two-day bidding round. the country receiving pledges from energy firms to try to boost output by more than 4.7
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million barrels a day, double its current output. toyota will begin selling what it calls affordable plug-in hybrid cars in 2011. the automaker's first plug-in model adds more batteries to the popular prius. new survey just out from the fdic find that 17 million americans do not have a bank account. and that 1 in 4 households is currently unbanked, or as they say in the financial, underbanked. joining us from the national press club in washington is martin gruenberg, the vice chairman of the fdic. it's great having on the program. we have chairman bair on the program at some point. the study is jarring. it's hard to imagine there are that many people without a bank account at all. can you go into findings of the survey and the takeaways? >> yes. it really is a ground-breaking piece of work. it's the first national survey ever conducted by the census to not only get national numbers
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for the first time, but we can break it down on a state by state basis and the 20 m metropolitan areas. 7.7% of u.s. households no accounts at insured financial institutions and an additional 17.9% are what we call underbanked. they may have an account but they utilize high-cost alternative financial service providers. so taken together, about a quarter of u.s. households found in this survey are either unbanked or underbanked. >> underbanked use money orders, cash-checking services, go to a pawn shop at least once or twice a year, right? >> that's correct. or payday loans or other alternative financial services. >> is the intent here to get banks to make a push to bring those in who are not already in the fold? >> that's exactly right. we really want to encourage banks -- this is a large market. it's a substantial market. we really want to encourage
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banks to compete for it. and to offer products that are low cost and really meet the needs of these households. >> how do these numbers compare historically, or do we know given the ground-breaking nature of the survey? >> yeah, this is really the first of its kind. we've had a much smaller survey on a local or regional basis. but we've never really had a national numbers with the kind of reliability and depth that this survey offers. >> martin, why do you think there are so many households that are underserved? >> well, it's a good question. i think for the unbanked, about half of them are people who have never had an account and half are people who have had an account and have chosen not to continue. i think for the half that have discontinued it, costs really seems to be a factor, as well as access to the insured institution. for the other half, it would be appear that access -- having the
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money -- enough money available to them to make it seem worth while while to have an account seem to be the key finding of the survey. >> how does that change, that second half, the idea they don't have enough money available to them to make it worth while to have an account? how does convincing the banks to step up to the bank really change that dynamic? >> well, i think the key thing is to offer financial services, whether it's a transaction account, a kind of checking account, or, for example, a small dollar loan program. which are clearly in demand by this population, but which banks oft oftentime are not offering or offering in an effective way. clearly, crucial thing that makes banks unique is the opportunity to offer a federally insured savings account. no alternative provider can offer that. for banks to think of innovative ways to give people access to savings accounts is really a crucial goal here. >> how worried are you about the
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number rising over the next one to two years? we keep hearing from analysts who say that one of the biggest threats to the consumer is having credit lines pulled and somehow just leaving the banking system all together. is that a real danger as we go into 2010? >> that's something we'll follow carefully. one of the benefit with the census survey is we're going to be able to do this survey every two years. so we'll now be able to monitor over time who's unbanked or underbanked in the united states and the kind of progress we're making with the problem. >> you're joining us, i know it's a little off-topic, but obviously citi's going to be the big talker of the day. has the fd -- we've seen some statements from treasury this morning. has fdic weighed in on the deal now that this is done? >> yeah, i'm not in a position to comment on that this morning. >> you know, martin, one other question. i know a lot of the people who don't have bank accounts wind up going into a walmart to cash their checks, do something like
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that. is there ever a sense that reaching them through walmart may be a way to grab them? walmart can't become a bank, right? >> right. walmart is not a bank and isn't under our current laws able to own a bank. and, you know, people should go for the low-cost service. and if walmart's offering a low-cost service, that's fine. what we want to do is encourage banks to offer competitive low-cost services. the one thing the bank offers that no one else can offer is the federally insured savings account. and that alone is an important reason for families to consider having an account with an insured institution. >> martin, thanks for your time this morning. good to talk to you. >> thank you. the story of the morning, bank executives going to the white house today to have a sit-down with the president. in the "squawk" boardroom, the head of the securities industry and financial markets association, tim ryan will tell us about the climate in the banking industry from bonuses to paying back the t.a.r.p.
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his reputation is expanding faster than the universe. he once had an awkward moment. just to see how it feels. he lives vicariously through himself. he is the most interesting man in the world. >> i don't always watch cnbc, but when i do, i prefer stocks to watch and the animal orchestra. keep watching, my friends.
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♪ here comes santa claus jj right down santa claus lane ♪ ♪ all his reindeer pulling on the reins ♪ ♪ bells are ringing ♪ children singing >> sounds pretty good. >> do have you anything to say? >> if he is dead, elvis, he's spinning in his grave. that's what i have to say. >> you aren't going to endorse that what we just -- >> no, no, no. there will be no endorsement of the animal orchestra. >> you liked it. let's take a look at stocks to watch. you know you did. it was a good song selection. it was good to do that. it was added to the show. didn't subtract from the show. let's take a look at stocks to watch. sun and oracle, eu regulators signalled on monday they could clear oracle corp aez 7 billion takeover of sunmicro after the
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u.s. offer, company promised measures to ease the competitive or competition concerns. european union -- european commission said it was optimistic a satisfactory outcome was problem. was it, my sequel? my sequel database, it competes with one of oracle's. they thought they may not make it free. we need to get it through the eu, which is many times tougher than here, although we have starting to move that way in some of our antitrust viewpoints here. getting a little more teeth than it has had in the last 20 years or so. citi and the u.s. government agree to a t.a.r.p. repayment. the regulator as greed for $20 billion that the government holds in t.a.r.p. . will immediately issue $20.5 million in cap. exxonmobil was upgraded from buy to hold at scoite general.
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you saw the -- i want this guy on. i want -- we're calling him. what is it, efforting? >> efforting. >> this guy is cool. let's show him. this guy -- >> that guy right there. >> french capitalist. >> a huge french capitalist. he was a classmate of the -- that really suave dude, but he was number one in his class, they manufacture the bureaucrat. he left. he took it to the stratsphere. he laughs at some of the socialist tendencies of great britain. >> ahnre. >> i want him on. >> if you're watching, we want
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you on. >> i think we have a man crush in the making. >> that's true, too. he's 5 # 5 years old. >> look at that suit. >> people would say he dyes his hair like i do, but he doesn't. >> we'll try to get him on the program. when we come back, we'll ask a former chairman of the fdic about the rick of leaving the t.a.r.p. too soon. tim ryan, head of securities industry making his way to the set. we'll take a look at what's on the table ahead of all these bankers meeting at the white house today when "squawk box" continues. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves.
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it's a european shoulder bag. it was a gift. mm-hmm. giving you the gift of savings. now, that's progressive. call or click today. banking on america -- >> i did not run for office. to be helping out a bunch of, you know, fat cat bankers on wall street. >> president obama voicing some frustration on "60 minutes." today he visits with the nation's top banking executives to talk about lending and reform. the head of the securities industry and financial market association will tell us what he expects from today's meeting. the economy on the mend. >> first gdp goes up.
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then hours that are worked by workers who already have jobs goes up. then employment goes up. and then unemployment starts to come down. >> find out if economists are tinkering with their estimates for the gdp heading into the new year. and will the buls keep running in 2010? or will the bears wake up? we get an outlook for equities. "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and carl quintanilla. our guest host tote, representative paul ryan, ranking member of the budget committee and a member of the ways and means committee. he's with us for the rest of the hour. no big economic reports are due this morning, but the next three days we'll have a lot of big
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ones. inflation data, the fed meeting. let's check the futures right now. up about 65 points, indicative of upward pressure on the averages this morning, which should put us pretty close to another intermediate term high, even though there weren't supposed to be any more, though. >> positive for the month, up five of six weeks, almost 20% for the year. >> we're positive all the time. >> you are mr. positive. >> just happy to be alive in this country. why, you're not? >> you're being awfully -- >> you seem to be saying -- are you? >> that's great. >> you're not right with me, but you're -- >> i'm left with you. i'm kidding. abu dhabi bailing out dubai offering $10 million but dubai warns creditors still need to approve a standstill on outstanding debt. equities in the region are rising on that news. dubai's benchmark stock index up more than 10%, 10.3%. abu dhabi's stocks up in early trading. joe mention the that's why we're
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getting a few more green arrows on this side of the pond. meantime, the president will meet with executives from the top u.s. banks including goldman, jpmorgan and citigroup. he's expected to push them to step up small business lending and back legislation to overhaul wall street regulations. aides say the president will call on bankers to take responsibility for helping the economy after benefitting from all those taxpayer-funded bailouts. in an interview on "60 minutes" last night, the president complained about bankers' bonuses. >> i did not run for office to be helping out a bunch of, you know, fat cat bankers on wall street. the only ones paying out these fat bonuses are the ones that have now paid back that t.a.r.p. money and -- zhou think that's why they paid it back so quickly? >> in some cases i think that was the motivation. >> president's meeting with the bankers at 11:00 a.m. eastern time and then he'll make a public statement about the economy. and it is official, citigroup reaching a deal with the government to pay back some of its bailout money. the bank's going to be issuing
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$17 billion of common stock and another $3.5 billion of tangible equity. citi will terminate the loss-sharing agreement with the government. as of 2010 the bank will be out from under the watch of the pay czar. steve liesman has been working the phones and he's with us for the latest. >> you can see how complicated it is by going through all the stuff. i'm looking here, i just got it, the 20-page release from citi that has all the nitty gritty details here. treasury saying it will likely -- telling me this morning, $13 to $14 billion profit from the citi investment when you add in dividends paid, the upside it expects to get on common shares, as well as other assets that it got. treasury official saying would he got out of this at a profit. any new money is -- when the obama administration puts money
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into -- equity it will sell $5 billion of common stocks. meanwhile, the citi can will and the risk weighted assets will grow by $144 billion. it will escape the government clutches of compensation beginning in 2010. joe, that are the bake outlines of the deal as i get it here. we're going to pore through more of the details. as i'm looking, inside citi's pdf value, 20 pages, it shows they have the highest or near the highest tier one capital ratios in the business right now. i don't know what you think
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about citi and whether or not it was a basket case. it's not anymore. but right now, according to citi, and i'm hearing it from other folks, they're right up there with one of the better tier one cap common ratios in. >> we've been with secretary geithner, when he says things are so much better right now than they were a year ago, if you can't look at this company, which people had, you know, had them dead and buried, the walking dead, the zombies, $20 billion, people are going to give citigroup $20 billion. no one gives money away if you think you're going to lose it, steve. >> exactly. >> not only that, what about what all the people said, joe, about how much money the government was going to lose on these investments and how much it was going to cost them. now, i don't -- you know, we can go back and look. maybe there's some -- i mean, i would expect any minute now, joe, watch -- would you watch the wires? i think wells fargo is going to step up and they'll be knocking on the treasury's door right now. they're going to want to get out. >> they don't want to be the last people. >> i don't think they can help it now.
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all the 19 banks that raised money through the stress test. if you want to go back, remember when everybody was saying the obama administration is going to nationalize banks. where are they now? >> the guys that said we need to do this and this is a huge mistake, i don't hear any saying, gosh, i was wrong. >> nationalization of the banks, single payer system, all the fears and all the things encouraged -- >> for you, let's be fair. the t.a.r.p. money was not lent on. but i wonder who has whom to blame on this. did i get the grammar right? >> i'm not sure. >> the money goes into the banks and how long after the money goes into the banks did congress pass compensation restrictions? like a nanosecond or two or three months. by january, i want to say, of '08 or so, or '09, i'm sorry, they're passing thee compensation restrictions. did the bank really consider that government money as permanent capital? the question is whether or not, as a result, the banks are looking at this pot of money and
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saying, you know what, this is not capital i'm going to lend on. this is capital to pay back to the government. and maybe now that it's been replaced, maybe now we can get to a lending situation. >> i think that's right. look, t.a.r.p. was supposed to be not an equity injection, something to buy assets. then it turned into equity capital injection and all that stuff happened. inc. you're right, steve. once you get this stuff off the books, we'll lose money in the auto companies -- >> and aig, too, congressman. >> t.a.r.p. is turning into this resolving fund for the administration's economic policy. for stimulus and for all this other stuff. but once the banks get t.a.r.p. off the balance sheet, i think they're going to to have to start moving. >> is it really a revolving fund? as i read the administration's carefully worded comment, and i know they're being cute here, isn't it true what they're saying is we're going to leave the $140 billion of extra t.a.r.p. money unused? and that then is for congress to decide. so it won't necessarily be the administration, it will be congress that will make -- >> but i negotiated the taxpayer
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protections of t.a.r.p. when it's returned it goes down to pay down the deficit. >> unused money, what happens to that? >> that's the problem. they're going to bring the authorization level down of the unused money. that frees up, quote/unquote deficit money to spend on other things. they're linking the return of t.a.r.p. dollars with their new stimulus three. so that's how this becomes more or less a revolving fund. it frees up deficit spending dollars to be spent on other uses and that's how they're going to technically get around the notion of taking t.a.r.p. funds and spending -- >> my point is it's a decision congress has to make, not the administration. >> that's right. i agree with that. >> so you have to talk to your buddies over there -- >> so what congress will do -- >> right. >> you seem well informed and smart. are you going to stay in congress? i mean, are you -- >> -- >> do you fit in there or -- let me -- we'll talk off camera about it. president obama meeting with the nation's bank chiefs today for the first time since march
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20th. this is going to be confusing. tim ryan, not paul ryan. >> good name. >> good name. president and ceo of the securities industry and financial markets association. great to see you. you back -- how much of it as a percentage? >> i would say probably # 0% of what's going on we're supportive of. many things we think are necessary for the global financial institutions. >> and if you could point to the one thing that you think is absolutely necessary, what's the best thing about -- >> the most important thing here is want to have too big to fail or too interconnected to fail. we need a resolution system that allows holding companies, broker dealers and insurance companies to unwind, to restructure or to liquidate in a reasonable manner. >> let me jump in here. exxonmobil just announcing they
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have an all-stock transition to buy xto. >> that's a $24 billion market cap company. >> transaction's valued at $41 billion. includes $10 billion of existing xto debt. when was the last time we saw a double-digit billion dollar merger, joe? >> i guess it was -- this is a big premium, too. closed at $41.49. immediately, there it is, $51 to $51.50. >> 25% premium. >> 25% premium. and -- >> didn't you just do exxon in stocks to watch? >> i did. it's a stock deal. we'll take a quick look at this. exxon was dwrup yup graded by societe generale which got us on -- >> down by $1. >> yeah, a little bit. it really looks like $31
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billion. it includes $10 billion in debt. there are those that say, you know, one of the things you worry about with exxon on how much they replace every year. you know, whether they've spent a lot -- enough on increasing production. and on development. and, you know, if you can get it -- if it seems cheap in the market, why not go ahead and just buy it instead of finding it -- it seems so hard. >> that's exactly what they lay out. they say xto's strengths in terms of r&d operational capabilities is why they're interested. >> they're going to establish a new upstream organization, it says. upstream means ent exploration and production with xto. xto, this is one of those that has been on a list of, you know, if someone's going to buy something in energy, and on who doesn't want to own stuff? people said that buffett's whole reason for buying burlington northern was an energy play. you move 490 miles on a gallon of gas for a car.
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people setting themselves up for what is still going to be a hydrocarbon-based future, though. >> for a long time. even as you develop new sources, the hofmeisters of the world say you have to put it in the ground. >> xto's resource base is the equivalent of 45 trillion cubic feet of gas. they say that that will complement exxonmobil's holdings in united states, canada, hungary, poland, germany and argentina. >> xto is -- its properties are concentrated in texas, new mexico, north dakota, pennsylvania, west virginia, arkansas, oklahoma -- >> those are the private fields. you can't get -- the government won't let you get -- >> there's that big field in pennsylvania, right? >> and in north dakota. those are private landfills. all the gas in the mountain region, interior department won't let you get it. >> tim, you are -- you sat down with the big exxon merger but let's get back to what we were
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talking about and we'll come back to this while we have you here. what else are the key things in the reform that you think will help the system? >> well, as i said, the resolution's already -- that's key. having a systematic regulator, having a regulator that's accountable, that's responsible and competent to really see over the horizon, to look at issues. especially the interconnected issues. that's imbedded in this statute. there are some things we don't like. >> how much of it is -- is it overkill, congressman? >> let me say, i worry about this bill basically taking t.a.r.p. and too big to fail, making it national policy and setting up a banking system where you have a whole little fannie mae and freddie macs throughout the financial system. i'm worried this is huge overreach, putting too much power in the hand of discretionary politicians. there's two provisions i want to ask you about. number one is this prefunded dissolution trust fund, $150 billion fund. what are your views on that? i think that can be used to
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finance other things. number one. number two, what about giving secured creditors a 20% haircut? isn't that wreak havoc in the bond markets? >> it's good to see the ryans have a similar view here. i mean, you picked the two issues on which we really object. so -- and let me take the first one, the most important one. the idea of any kind of a haircut on secured creditors is going to disrupt really the largest -- >> it's the fiber that holds the bond market together. >> it is. it's the repo market, the interday markets. they're already skiddish. and this type of legislation or proposed legislation is very, very bad. we're doing everything possible to make sure that does not become law. that's number one. number two, we think the idea of prefunding is probably not the smartest way to do this. it's better to do it -- we agree with geithner and bernanke, it's better to do it after the fact, post, so you can figure out exactly how much you need and you can assess the right people. >> look at t.a.r.p. right now. you throw money on the table in
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washington, it will get spent on something other than its intended purposes. that's what i think this dissolution fund will wind up being. my biggest fear about this whole approach is you're setting up a system where large banks are going to get cheaper capital than the smaller guys. you're setting up a barrier to entry where these huge established businesses deemed systematically risky get cheap money verse all their competitors and that's what i call crony capitalism. our party didn't rein in fannie and freddie when we should have and now we're taking that mistake and we're replicating it into the whole financial sector, in my opinion. i think there's a better way to do this. two economists at the university of chicago who did an interesting paper and study on how to do a resolution system with two tiers of cushion. an equity cushion, debt cushion and also a -- sort of a market-based trigger. it's not the discretion of politicians to determine who gets bailed out and who doesn't. if i car companies is politically important, they get the money. it's more of a market-based system so it's transparent.
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have you looked at those alternative ideas? >> not the specific one you're talking about. you know, the way this is going to work out, hopefully, is we're going to have a systematic resolution board. hopefully we put in a system of systematic regulation, such that will never really, unless it's a cyclical meltdown again, will never really have to use this resolution authority. but what we want is we really want to eliminate all of this too big to fail discussion. that is a central issue right now. it really is. whether it's t.a.r.p., whether it's government support through t.a.l. fncht, here or outside the yat, the concern is are we just putting money into institutions because they're too big to do anything with? we to want eliminate that. >> tim, thank you. >> thank you. >> appreciate seeing you today in studio. >> thank you. >> you'll be with us, paul, for the rest of the show. we're going to fidel gates to talk about this exxon deal.
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exxon's buying xto for $31 billion in stock, taking on another $10 billion in debt. a very large deal in an important space. good to talk to you this morning. >> good morning. >> first of all, what do you make of it? what does it give exxon? are they paying a fair price? >> well, beauty is in the eye of the beholders. we really don't know yet. we'll wait for the conference call. exxon is not going to pay too much of a premium unless they know the upside potential in the asset they bought is significantly greater than what we know right now. they must have done their homework, exxon does not do anything like that lightly. so they must have really kicked the tire and know exactly what they're getting into. they are buying one of the best nonconventional plays in the world. it is in the u.s., very little risk, or upside potential could be significant. so that is a good deal for
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exxon. i also believe it's a good deal for xto shareholders because exxon stock has been the worst performing stock so far this year. they are getting a stock that in the long term will appreciate. the question is not if, it's when and by how much. and i think it's -- it adds value. it also is going to spike the whole industry. it will not be the only deal, but it -- basically exxon is the head of the class. and will dictate the tempo going forward. and i would expect more deals to come in the next three to six months. we have been waiting for consolidation for almost a year now. and finally, we see one big one going forward. and i think that should be good for the whole industry. >> right. what -- obviously, your point's well taken about exxon leading the class and people want to copy what they're doing. characterize for us the kinds of deals you see happening, then, over the next 6 to 12 months.
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>> major integrative oil companies left the u.s. 15 years ago because oil prices were low. you didn't see the upside potential. but what they overlooked is the nonconventional gas play. the smaller, independent oil and gas companies had no means, if you will, to go outside of the u.s. and take too much risk and all these things. they stayed home, did their homework and out of frustration and perseverance they discover the play. they developed the technology. they are the best in what they do. they are better than the majors in what they do. finally, they could not see the growth potential they expected outside of the u.s., in addition to the risk from politics and everything else. it became very difficult for an exxon, bp, shell, all these companies, to be able to replace reserve and be able to grow production.
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now, the u.s. and north america in general, opened a huge window for them and this is the time for them to take advantage of their financial flexibility and technical know-how outside of the u.s. to try to learn from the smaller companies how they did what they did and also take it to the next level. >> can you give us a few names that are going to rise to the top of the list of potential candidates? >> well, it goes without saying, it has to be the chesapeakes of the world, the devons of the world, eog, all these companies. my view -- and i have said that several times, put it in writing for the last six months to a year saying, any company whose market cap under $100 billion is a legitimate takeover target. >> sure enough, you look at some of those names he just mentioned, devon is up by $3 in the bid/ask. so if we run through some of those names -- >> they are outside potential
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between 40% to 50% in the next three months. >> wow. why now, fadel? why are market conditions rights for this now? why have we been waiting so long? >> i think exxon, it's like the opera, the big lady sings at the end of the opera because they're saying, this is it. you cannot wait for the next show. you better get on with it for you. exxon has been waiting, waiting, waiting. i'm sure exxon must have looked at other and found xto is a perfect fit for them. >> do they have to buy this? joe mentioned the criticism they've taken over the last couple years for not being more aggressive in development. did they have to do this externally or could they have done this organically? >> i'm not sure you could duplicate the position -- i mean, this is like beach-front property. are you not going to find, are you not going to create more of it. you have to buy existing property and maybe improve it. but you are not going to find, you know, new property open or
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available. most of the share plays have already spoken for. >> all right. 45 trillion cubic feet of gas, shale gas, coal bed methane. these are things exxon already has, right? >> yes. but exxon is a very large company. exxon produces every single day approximately 4.5 million barrel. so they need a lot of additional resources nod for them to maintain, let alone increase, this volume. so one of the criticisms the market had is that exxon is too big to grow. but now with the acquisition, exxon opened a wedge for growth that will be significant for a company, even of exxon's size. >> does this put pressure on any of the other big players like a bp or somebody to go ahead and try to find some -- >> absolutely. absolutely. it's going to be a merger and acquisition, as i said, feeding frenzy over the next few months. >> bp, who else is on the list
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of people who needs to be buying? >> every company that has market value over $100 billion. especially those that don't have a big footprint in north america are scrambling right now to get online. >> when was exxon's last deal? >> ten years ago, and it was one of the best acquisitions they have ever made. exxon does not make bad acquisitions. >> you see any hurdles in approval? >> i will see none whatsoever because, as i said, you know, if you had exposure to a customer, marketing is really the biggest hurdle. so it's a bad industry to be in right now. but this is the only think that politicians talk about. they don't talk about anything else. i think this is also good for the country because now xto assets is going to come into very strong hands. that is exxon.
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that's another way to look at our national energy policy and see how exxon will participate, if you will, if the government will design our national energy policy around natural gas, which we have plenty of, no threats, everything like that. so i think this is the future. exxon finally saw that. >> so the top line on this is exxon's overseas, exxon's deep water and now they're moving interior united states, this is a domestic energy play for natural gas, that's what we should take out of this? >> well, you have to remember something. exxon is an oil play, not a gas play. exxon made it clear in recent meetings that they expect to see themselves moving more towards gas than to oil. same situation with shell. i expect shell to be not far behind in making a similar deal. because they made publicly several times, they said we want to be 55 gas, 45 oil. right now they are 65 oil/35 gas. so it goes without saying, you
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cannot grow organically. it has to be through acquisition. >> exxonmobil is called down half a buck, something like that? >> about $1.50. >> the damage will be reasonable, you think, to exxon shares? >> exxon shares in the long term, they are going to do much better. exxon so far has been considered the qualititive stock. but since oil prices were moving sharply, people opted for companies that have growth, that have takeover potential. that is fine. but when things stabilize, i would go back to exxon. we have neutral or market and the stock has been big disappointment this year. longer term, i think,en will do very well. >> it's a 25% premium they've offered for this but this is an all stock deal. every tick lower for exxon shares, it lowers that premium. do they need a bigger premium to get this done? >> no, because a deal is a deal. and there will be white knight.
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nobody's going to be white knight exxon. >> yeah, they're sort of the biggest. >> i've never heard of that. >> the whitest of the white. >> because, first of all, any white knight comes across might be even a target for exxon itself. so you better watch out. >> yeah. devon's up 4%. the energy etf up more than 1%. big oil just got a lot bigger. thanks for the time. >> thank you. >> joining us with quick analysis on the exxon deal. obviously, this is the biggest u.s. energy deal of 2009 and ranks in the top ten deals, according to the research. >> $31 billion, that's huge. exxon's very quconservative. that's interesting. they don't do things likely. coming up the final countdown 2009 about to go into history books, so what should the bulls and the bears expect in 2010? that's coming up at 8:30 a.m. eastern.
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good monday morning. welcome back to "squawk" here on cnbc. we're an hour away from the opening bell on wall street. a deal-making monday. exxonmobil announced it's buying xto energy, all-stock deal
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valued at $31 million, once you take out $10 billion in debt. just broke a few minutes ago. joe, you seem -- you're impressed. >> we had the m&a guy on earlier, we talked about the buffett deal. that's a big number, $31 million. xom buying xto, seems good. seems like a good idea. i don't know whether that factored into it. >> the xto -- >> don't you talk about anything in trillions. trillions of cubic feet. >> it's interesting what it says about our natural gas. devon sold overseas stuff, moving more intercontinental. >> so this is something. we have 100 years' worth of natural gas. we have to open up federal lands so we can drill on that. but there's a lot of private land out there. like you said, pennsylvania, north dakota. i find it interesting you have these big boys coming inside the united states. that's good for our energy
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independence. let's make sure we have the right regs to get the stuff. >> it's cleaner but it is a hydrocarbon. i know what you want -- >> the point is, we own it. >> she loves wind. >> you'll be stuck in wherever it is, hallworth. >> we will come get you. >> you will never get here if you wait for the sun. like yesterday, you think you can drive around in a sun-powered car. >> it's hard to do before the sun comes up. it is official, citigroup reaching a deal with the government to pay back some bailout money. the bank will be issuing $17 billion of common stock and $3.5 billion of tangible equity. steve liesman has more details on this. this is a pretty big move in terms of paying back the t.a.r.p. >> yeah, this is the one outstanding. i think if you had to pick a bank where you thought the government was going to lose money, citi was the most likely. there were three different bailouts. one was a transformation of the other one. at the end of the day, the government was on the hook for some, what, $250 billion of
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assets, some of which were sold down. the big insurance wrapper. we got through -- so citi will issue $17 billion of common stock, 1.7 billion in common stock in lieu of cash. today, $22 billion of citi's common stock is coming to market. >> and you would never know it looking at the bid/ask. you're talking about dilution of better than 20% and citi shareholders think it's worth it to get out from under the t.a.r.p. >> this is either zero or a $20 stock is gg got to be the thinking here, right? you're not going to take a fire on buying and taking out citi here, if you think it's a $3.95 stock. there's risk involved. what there is here, i think, is a bet on citi's survival and prosperity here, right? you think there's going to be some return back. let's look at what the government's profit is on this deal. i was able to get down line by line.
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if you go through it piece by piece you find the government profited at three or four different stages of this thing. the first place it profited, the common shares is going to -- it would -- $5.4 billion if it sold oul stock at the friday close. that may not happen. are you cringing because of that number? >> i'm watching joe eat this muffin. i'm sorry. it's tough to watch. >> is that what the? >> it's tough to watch. >> normally i don't eat the stump, just the muffin top. >> i wanted to make sure you didn't disagree with the number. my numbers are good, thank you very much. so $3.95, despite as becky said the bid/ask hasn't changed. joe's making more. dividends on all the t.a.r.p. money, $3.1 billion. got $5.2 billion preferred from the insurance wrapper so the government's cost on that is zero. add is up, it's $13.7 billion. my guess is it comes in less than that but the government will hold on to some part of common shares.
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so not that bad. citi's going to book $8 billion of pretax loss to the government deal and that's the way it's going to work out on citi's books right now. >> i know it's tough to get you to give props to this administration, but have they at the very least been a good custodian of the t.a.r.p., which we know was put in place -- >> i want to say yes but i don't think i can. look o this -- on the banking system, yes. i think we're going to make money on the banking tough. the misuse, which started under the bush administration, was going off into the auto sector, into the housing sector. i would argue as a person with t.a.r.p., we went off the t.a.r.p. purpose. yes, the administration on the banking system is handling it the right way. just that narrow air. >> paulson resisted and resisted extending it beyond banks. and finally -- >> he did. >> -- he was forced to do on so at the time. >> i talked to hank at the time. bush administration made the mistake, the obama administration carried it on. >> and otherwise we would have gotten out clean.
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now almost certainly -- i heard they upped -- they upgrade the losses by $14 billion but still saying there's going to be losses from the aig, autos combined. but the banking side -- >> and the housing programs. >> however it worked, they stopped the freefall. and then now it's a matter of them getting their act together to be able to lend. >> when none of us thought citigroup would ever be totally in the hand of the public again. we thought it was going to be a government -- that that was going -- you know, sort of going to be under the government -- >> forever. >> there was a time when the bank was like -- >> this is a shock that's really going to be -- >> like a horse with its leg broken and people were saying, put it out of its misery. >> right. >> is going to be a private -- >> this not be nationalized and the old citigroup again. >> i guess the bottom line is, who knows -- i mean, let's assume it will succeed or not, but the question is, i don't think the taxpayer's going to be on the hook for it anymore. there was josh who came on last week and he said, this is premature and that the treasury is taking a rick with reputation and credibility of the whole united states if they have to
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come back in. >> our guest host, larry on friday mentioned all of these things, too. >> that we may -- >> that a lot of people have concerns about this. it could be too soon. >> i will point you, though, to the ratios that citigroup is putting in its press release this morning showing it's on par with bank of america and ahead of other several large banks on tier one and tangible equity. that's what citi's putting out. you can make your own calculations and investment decisions. >> steve, thanks. >> pleasure. >> when we come back, talks on markets this monday morning. all-star team of wall street's finest ready to jumpstart the week ahead. scott black and a lot more. if toyota gets credit for being the most fuel efficient car company in america, well, then how do you explain all this? chevy malibu, cobalt, silverado, and the all-new equinox.
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welcome back, everybody. take a look at shares of xto energy. you see a huge jump in that stock after exxonmobil is stepping in, saying it's buying that company for $31 billion. when you don't include another $10 billion in debt, steve of the schork is on the "squawk" news line. what do you think of this deal? good news/bad news? >> absolutely excellent news and goes and supports this stheerry that, look, high prices are the best cure for high prices.
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why does exxon want xto? because xto has significant expertise and more importantly, significant land arrangements in the, quote/unquote, nonconventional shale place. whether we're talking about the barnett by dallas, the haynesville in northwest louisiana, so forth. so xto has tremendous resources, inventory, of, again, these nonconventional shale plays. as we saw with natural gas this year, becky, despite the fact that producers are pulling back their conventional sources of natural gas production, these shale plays have been able to offset that. so it's a tremendous boone for exxon and certainly for the shareholders of xto. >> we spoke with fadel and he said this is off to the races for the big oil companies that have more than $100 billion in market cap. without a big footprint in the u.s., they'll all be looking to buying other smaller companies out there. you agree with that? >> oh, absolutely. you know, being based here in
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philadelphia, what i'm really kicking myself, becky, is i didn't start buying land in western pennsylvania years ago because this is where the marsalis shale play it. this is a tremendous domestic resource. a resource, mind you, that we always had but up until a few years ago, was technically unrecoverable. but what happened is we had a major run-up in natural gas prices in the beginning of this decade. the technology has now moved forward. and we can now extract this gas and this oil from literally rocks. we could do it economically and now xto and now certainly exxon will be able to do it. and it's gok a tremendous boone for their margins. i agree with fadel, it's a race to acquire anyone who has that presence in the north american footprint. >> shares of devon energy are up by 4.5% on this news. what are other names of potential takeover targets? >> devon, chesapeake energy, one of my favorite companies out there, certainly they're the ones who brought us the
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haynesville in louisiana. so they're certainly a potential target also on this level. >> stephen, anything else we should be watching for this morning? >> absolutely. i would -- again, i would watch for the price -- i would like to see how the -- i'm the commodity guy. i would love to see how the prices of, again, natural gas and oil are going to react. what i spoke about this morning is, we have that fall down in oil and we have the rise now in natural gas prices. we're having some sort of convergence to the old relationship between these two. i would expect to see that relationship continue to improve. ie, oil prices fall, natural gas rise relative to oil. >> that's what we're watching right now, crude oil prices down by better than 1% again today after nine days trading lower. this is the ninth day in a row. you're talking about crude oil prices down below bz 70, lower than what we spoke to you earlier this morning. you are talking about natural gas prices up by better than 3.2%. >> steve, news out of china, they're slurping up everything
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again, big-time oil. do you figure that's what kept it at $70? is wasn't enough to move it back to where it was at $75. maybe that's why we've been so stubbornly up here. >> exactly. i think a lot of it, joe s irrational exuberance. regardless of themet ricks, i appreciate china is a monolith and there's demand. if we look at the regression models and statistical models, we look at personal expenditures on gasoline, given how cheap gasoline was over this summer relative to a year ago, we did not see commensurate increase on demand on the consumer level. if we look at recently on friday's report with retail sales with the rise in energy and gasoline prices in october and november, we did not see a commensurate increase in gas line station receipts. this is telling me that demand here, real demand here, is lagging. and i china's a great story. we are the richest country in the world. if our demand for gasoline at
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these levels is waning, i can assure you, so too is it in china. china is hoarding, building supplies. building and sticking supplies into the ground, into tank s far different from burning it and using it at this point. i think that story, and i've been saying it aall along, beating my head against the wall, i think that story, ie, china is overdone. at the end of the year, we're seeing some sort of correction back to reality. >> thank you. >> all right, guys, thank you. >> it was like an encore, we were holding up the lighters, bringing back -- well, you still go to those. >> so do you. >> no, i don't. the dow closed -- captain and taneil, i'm there. >> abba. >> dow closed at the second lowest level in 2009. joining us is scott black, president of delphi, nick, paul ryan is still here. scott, let me start with you. i know we had you on recently,
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and i said, what specifically is overdone. you said, just pes, just the valuation. we're at 1100 on the s&p. when did you start getting more defensive and deciding we were overvalued? what number on the s&p? >> a long time ago. if you really look at the earnings per share, even in the latest quarter, start a little over 2%, but the revenue per share in the s&p 500 still down 12.9% year over year. i should have pointed out on that prior show, it's on forward earnings, not on trailing earnings. we're still roughly 17 to 18 times next year's expected earnings. >> when did you -- what number on the s&p did you decide was too expensive? it was 1,000? was it -- >> that's a wonderful question. we're bottom-up stock pickers. we find companies with low pes, prices to pick. we try not to focus on where the market's going, more like the warren buffett, trying to allocate good benefits. the s&p is really fully valued at this point.
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there's tons of liquidity. as you know, $3.3 trillion in money market assets on the sideline and nothing in the bond curve. so the money keeps pressing into the stock market. >> so it's uncomfortable to buy in or to stay long. nick, you're uncomfortable, but you figure you've got to hold your nose and buy and maybe worry long term? >> yeah, i think so, joe. what happens here is in our shop we're growth investors. we see a lot of great opportunities out there, but the underlying fiscal and monetary policy and the direction we're taking the country is what makes us nervous. the valuation levels are quite reasonable here. >> i'm trying to -- there's a disconnect. there's a disconnect. >> i agree. >> there's a disconnect there, though. you don't think they're reasonable at all, do you, at this point? they're definitely -- we're discounting into the hereafter at this point. >> no, some individual stocks are cheap. when you look at the bigger names, and we bought them near the 666, the big companies like the microsoft, ciscos, oracles,
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they were dirt cheap now. they're now 14, 15, 16 times forward earnings. you know, they're reasonable values but not great values. many of the really washed out industrial companies and the con grom rats have had huge moves and selling 13, 14 times over their prior peak cycle earnings to begin with, two, three times book value. like the itt, the 3ms, andersons. they're not great values. you have to have an industrial recovery and maybe earning power two years out to support the current prices. >> scott, we're hearing from a few people about year-end 2010, 1 1250, 1200, would that price you? >> nothing surprises me because -- >> because you're not forecasting that. >> we try not to forecast the market. >> so total bottoms up, still things you might buy but you're not buying with both hands, does that sum things up? >> no. there are certainly groups that still have cheap stock. some of the retail companies are
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still selling at 8 to 10 multiples like the buckles, air postal, some of the steel companies and steel capacity utilization is going up, allegheny technology, commercial metals. these stocks are still cheap priced to book. the earnings are turning and reasonable values. as a whole, the market's picked over. >> nick, 1200, 1250 possible by the end of next year? >> i think it's very possible. you have to remember the backdrop from a top down is if the economy starts to slow down again we'll see an additional stimulus package in place, we'll see the fed again inject more liquidity. so they're not going to let this bubble collapse here. they're going to have to continue to feed this monster. so that's going to provide impetus for the financial markets, too. a lot of this capital is not going to go into real production right now. there's no need. there's excess global capacity. so the money's going to go where. it will go into the financial markets. and in a single digit or low single digit investment world here, meaning that, you know,
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you've got corporate bonds yielding 5% or 6%. stocks can easily do #% or 9% annualized over the next five years. >> nick, thanks. scott black, thanks. congressman, we had you in that triple box for, you know, for targets for next year. and, you know, what stocks are going to do well. do you have a year-end target on the s&p? >> it's not my place to make those kind of picks. >> all these programs go through, cap and trade, health care, you have a zero target on the s&p? >> let's think about this. maybe it's commodities because this carry trade buble is not going to go on forever. >> you are going to answer me, good. >> no, i really think -- that's the only thing we got in town is kerry trade. that thing is going to pop one of these days. who knows what it's going to look like when it pops. look at what we're doing right now. the government taking over the health care sector, trying to take over the financial sector and we're on a huge spending and borrowing binge which is going to give upward pressure on
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interest rates. we'll have to take away have to monetary, quantitative easing. all that will happen and it will be a witch's brew in 2011. that's why fiscal and monetary policy -- >> it's got so much momentum. it's what somers calls express velocity -- >> i'll believe it when we see it. i think they're pulling growth out of 2011 for 2010 -- >> do you think medicare -- we've got to go. >> it's going to be bankrupt in eight years, so we'll be able to add more people to it. >> a couple years? >> i can't have it now? okay, good. >> well, for you, maybe. >> all right. all right, when we return, more monday morning headlines that have been flying through fast and furious. exxon buying xto. you've got citigroup coming up with the deal with the government to pay back the t.a.r.p. money. all the news you need to know.
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okay, there it is. the big news this morning in stock land is xto energy being acquired for $31 billion in stock by exxon, and that will light a fire under all the energy plays, all the natural gas plays that people have been talking about for years being swallowed, the chesapeakes, the anadarkos -- >> half a percent. eog. >> these rigs last year are fracturing.
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how they can penetrate the rock and get it out. it's amazing technology and has opened up the gas reserves in this country. it's great to seeing that being deployed -- >> you know the controversy -- >> sure, but i think that controversy's way overblown and i think there are safeguards you can put in. it's way below the water tables. >> many years, though. i'm a long-term thinker. what are we going to do after 100 years? >> natural gas -- >> yes! >> medicare goes bankrupt in eight years. >> we didn't run out of stones for the end of the stone age, right? we forget that. ever hear that? >> i have heard that. >> from you, i think. >> when we come back, financial reform, a health care overhaul, the budget, all in a day's work for congressman ryan. we'll get a final "roll call" with our guest host. first, the worst week for gold last week since february,
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welcome back. our guest host, congressman paul ryan, ranking member of the budget committee, senior member of the house ways and means committee, has been our guest host for the past couple of hours. we've had a pretty good time. we've had breaking news here and there. on the hill, house has passed
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health care. it's in the senate. we've now got financial reform, passed the house -- >> hout of the house, into the senate. >> -- into the senate. is the senate going to be a decent -- >> an agent -- >> a backstop of any kind from votes? >> 60 votes. 60 votes. they have an enormous advantage in the senate, the democrats do, because they have 60 votes. if they get this thing done before christmas -- >> which one? >> well, if they get health care done before christmas, it makes it much more easier for them to get this done in law. what they want to do is get this deal in the senate, 60 votes, then bring it in tact to the house, pass it before christmas and not even have a conference committee. i'm not so sure they're going to be able to get that done. on financial stuff, on all the energy stuff, that's going to go into next year. look, underneath this is basically a common ideological theme, and i think really, more what's at play here, not to get soupy about this, but it's basically the american idea versus this new notion of turning our system into a european welfare state, you know, where the goal of government is no longer
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equalizing opportunity for individuals, but equalizing the results of people's lives, and that is really underneath all of this stuff, and that is why we in the opposition party owe it to the american people to give them a real alternative, to reclaim the american idea which made this the greatest, most exceptional nation in the world. >> aren't you worried about the democrats, given the opposition to financial reform, for them to go out in the fall and say look at the republicans in the pockets of big bankers? >> not a single republican voted for this for a really good reason. this makes big business in bed with big government. this is the epitome of coney capitalism. i did an opinion in op ed magazine about too big to fail, permanent t.a.r.p. basically, you'll help the big guys at the expense of the little guys. yeah, they're going to have bank demagoguery and bank populism to try to backlash those of us that are reporting on what i call legitimate criticisms. and i notice you didn't say anything about my packer tie. going to get a wild card bid.
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>> brett who? >> i'm not sure who that is, but aaron rogers. >> thank you very much. we appreciate having you here. >> thanks for having me. >> that's it for today. make sure you join us tomorrow. "squawk on the street" is next. live from the financial capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines. >> and i'm erin burnett. >> welcome back. >> bon dia. >> bon dia. anyway. oh, i have to read. futures right now are up 550. let's check it out, vis-a-vis fair value. oh, we even get a little extra added boost here. >> mm-hmm. >> yeah. add them together, 6, 7, 29 above fair value, good for 40 or 50 on the dow. >> exxonmobil announcing it's buying xto energy, an all-stock acquisition valued at $41 billion including debt, mark.
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>> citigroup reaching a deal with the government to pay back some of its bailout money, issuing $17 billion of common stock. i assume that's dollars, not shares, and $3.5 billion of tangible equity. >> and the market also moving higher on news this morning out of dubai. many people say it's a surprise, but it should not be to "squawk on the street" viewers as we reported what happened. abu dab you is paying the $3.5 billion bond due today for dubai's subsidiary. it will continue, but it is a sigh of relief from global markets on this news that you heard here, mark, two weeks ago. >> i remember. let's hit the markets! we start with bertha coombs here at the big board. bertha. >> thanks very much, mark and erin. the dubai deal certainly boosted things overseas in trading and helping our futures very early on. we are poised to open at fresh highs on the dow and the s&p. exxon, though, will be a drag. that deal for xto valued at $41 billion total, includes $31


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